I need not spell out Malta's many economic problems, nor its great opportunities if it manages to get its act together. The purpose of this article is to try and see whether in Malta there is somebody, some person or institution, who can be an agent for change, who can act as catalyst to get Malta out of the collectivist vicious circle into which it has fallen in the last generation.
If you want to read about the urgent need for fiscal reform, then peruse what Central Bank Governor Michael Bonello said recently in his speech to the Institute of Financial Services. If you want to know Malta's great potential, look at its young people.
We owe these young people, and the ones who will come after, not a living - that they have to earn for themselves - but the right environment, both natural and man-made, including the right culture and economy in which to grow and develop.
If we in Malta have lost this power to mould our environment, in its widest sense, then it is our fault. Since Independence in 1964 we have had the reins in our hands. We did do good, but we did not do good enough, and if we are not careful, we will drift further. At a point, there will be no coming back.
Radical and urgent changes are needed across the board, on many big and small things, changes have to be made in an enlightened manner and with the good of the country firmly in mind.
But, in order to reform, there has to be a will, a catalyst, an agent for change. Let us look around us. Who can this be?
The institutions which have the actual power to make a difference are the two main political parties, the labour unions, and the private business sector.
It is the two big political parties which ought to be the agents of change. They are basically much the same. The reason for this is that they face the same constraints, have to fight elections, and both want to lead, i.e. be in power, for as long as possible. The only way they can do this is by winning votes. And that often means more public expenditure.
The extent to which a leader administers with vote catching in mind varies. Whatever the style, ultimately the political parties have to play to the ear, to the pocket, to the fantasy, and to the heart of the voters. In this scenario, unfortunately, logic and the long-term good of the nation often play second, third, or even fourth fiddle.
As a result, therefore, the incumbent party is rarely seriously criticised by the other party for largesse (excessive wage settlements, additional holidays), draconian taxing powers (except when a new tax is introduced since this is very visible and clearly damages the proponent's re-election chances), citizen monitoring and police powers, privileges to members of Parliament, and such... except, that is, if the Opposition can somehow make a case that this largesse has benefited "cronies". One problem is that, once given, such goodies are very hard to take away, and the state is saddled with them, as we are now witnessing, especially when the government came to take the essential step of reducing vacation leave.
If the majority of voters depend for their income on the state, they are going to vote for the party which promises the greatest spending and this means that the state will suffer from spiralling taxes and debt. We are in this sort of situation. I did not do the actual, detailed calculations, and I doubt whether all the required statistics exist, but if one adds up all the votes commanded by state-dependent people, they are likely to be in the majority to those who depend on the private sector.
State-dependent people include all civil servants and those employed by the government, people in the various authorities, people whose enterprise depends on government subsidies, people who work in companies whose majority shares are owned by the government, people who work in private companies where the companies' main source of revenue is government work and contracts, students, pensioners, and those receiving social assistance.
Tot these up and you see that our democracy is controlled by people who get most, if not all, of their income from the government and this very succinctly explains why free spending governments are popular and why we are in the vicious circle of tax-borrow-spend.
As things stand, therefore, the two political parties are unlikely, except under inspired leadership, to be the agents for change. Their incentives are stacked up against their taking strong, remedial action.
As a solution to our big and growing problems, some mention a government of national unity, by which I guess they mean a combination government with both parties in it. This, of course, will kill both any opposition and the vote. It would also be the peak of irony, transforming problems into sinecure. Co-opting experts to government might help but how is one to protect the experts from political pressure from their colleagues?
Many criticise politicians. This criticism is justified if a politician is corrupt, negligent in his or her duty, capriciously discriminating, makes his country subservient to his interests or that of his party, and such; we all know when it is bad, even when it is not illegal. But we have to appreciate that politicians, like other talented and ambitious people, have to succeed in order to justify their time and efforts, that success is measured by acquiring office, preferably in government, and that to be elected in power you are often forced to pander to individual voters (that's us!) who may be good, bad, opportunistic, greedy, saintly, lucky, unfortunate, capricious, and so on, each wanting something or someone. By the time a person makes it to Parliament, let alone makes it to minister, our system as it is makes it inevitable that this person is burdened with so many obligations and allegiances that the proper, "objective" administration of public affairs becomes well nigh impossible.
One thing we should try to tackle at the earliest is electoral reform so that individual candidates gain a measure of distance from voters. Parties would choose the candidates whom they think are fit to represent them and the people. A party first past the post system would to some extent cushion MPs from voters and let voters make more objective choices since a party would be less bound up with the people representing it in each district. One would suppose, also, that the party would be more enlightened in its choice of candidates to put forward than the present system. Such a system would not completely solve democracy's endemic "vote pandering" problem but it will help remove politicians from too many and too direct obligations.
With time, some distance from direct voter interests would also help our society evolve from the still prevalent feudal culture to that of a modern democracy with free markets.
If one's mentality is feudal, if one manages his official function within a state in a feudal manner, it will be very hard for him or her to understand the limits of propriety in a modern society. Our present electoral system is based on personal allegiance and thus support feudal-like structures and customs. It is therefore tolerated, within limits, for the edges of state/party/private interests to be blurred.
There are signs that we are slowly evolving out of this. Furthermore, evolving more fully out of feudalism would mitigate tribal sectarianism. This party dichotomy has long been a threat to our development because it stifles debate and the proper pooling of resources.
The labour unions have great power but since their constituency is rather clearly defined, they are bound to have their prime objective rather restricted, namely to protect and enhance the interests of workers.
Whenever they stray outside this remit, they are bound to have their legitimacy questioned, at least in regard to such an issue. Workers do have a right to protest against nuclear ships visiting our Grand Harbour but people do not accord such an action with as much credit they do unions' actions on industrial matters.
This worker-interest focus which effective unions have tend to militate against their tackling national problems, or at least to accord them the right priorities. As we have seen recently, when it comes to acquiescing to the reduction of workers' entitlements unions are understandably queasy. So, unions cannot be the agents for the changes we need to put in place.
¤ The second part of this article will be carried next week.
Paul V. Azzopardi is managing director of Azzopardi Investment Management Limited (www.azzopardi.com) which is licensed by the MFSA to provide investment services, including stockbroking. This article is only meant to provide information, which the writer believes to be accurate at the time of writing, and is not intended to give investment advice and its contents should not be construed as such. The value of securities, and the currencies in which they are denominated, may go down as well as up. Readers are requested to seek professional financial advice tailored to their own personal circumstances.